Posted on 09/21/2008 8:32:53 AM PDT by Flavius
Treasury Secretary Henry Paulson said Sunday that foreign banks will be able to unload bad financial assets under a $700 billion U.S. proposal aimed at restoring order during a devastating financial crisis.
"Yes, and they should. Because ... if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said on ABC television's "This Week with George Stephanopolous."
(Excerpt) Read more at news.yahoo.com ...
You're right- it would cause delay that might exacerbate the crisis. Fully understanding that- I still ask- have we EVER in our history given this much power to an unelected individual- and what will the repurcussions of that be, as a precedent, over time? The constitution works- except in a crisis?
Figures being kicked around, worldwide, for this mess are now estimated at 150+ TRILLION dollars.
Read with comprehension! They will pay according to the quality.
Government is not supposed to make money on "deals".
But they will either sell (at a "market/book" clearing price) to the FEDS or DIE. They will have no choice.
And I'm sure you are not willing to explain why, so you don't make a fool out of yourself.
“If a house in your neighborhood sold three years ago for $100,000 and it is now selling for $30,000 or $20,0000, is it a good investment??”
It probably IS to someone that wants to buy a house to LIVE in versus those that buy a house to hold for two years and then walk away with a 200% profit.
I see the whole “nothing down”, financed with an ARM that doesn’t adjust for 3 years, and a market in which house prices double every 5 years as a catalyst for much of the current problem.
But houses are houses and people still want and need them.
As you have pointed out in many of your posts, there is still a lot of value in the assets behind this bad paper.
I am not sure you read my entire post. Did you read the part that said: “We can argue as to whether these limitations are appropriate or whether more are needed. Hopefully that is what our representatives are doing!”
As for your comments regarding Paulson, what are you recommending?? Shall we go ahead and fire him too??
Thanks. I was being to think I was wasting my time. I know I don’t have it all right but I really wish people could deal with facts and not emotions.
Government is not supposed to make money on “deals”.
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Yes, and if wishes were fishes, pigs would fly. We can all argue for limited government (I strongly believe that) but in times of crisis government DOES make deals. The RTC is the most similar to this one. AND, the government did make money on it!
Well, exactly. There are no buyers for this stuff - nor for all of the excess real estate, nor for the huge amount of excess commercial real estate that has barely begun its own implosion.
With no buyers, the asset is valued at zero dollars. Someday, somewhere, some buyer will probably appear for some of the physical real estate, at least. But many of those homes in distant, undesirable suburbs are going to end up as crack houses and will ultimately get bulldozed. Value: zero dollars. And we own them, now. ;)
So far, banks have been unwilling to do so, because they’ve been valuing the debt way above market value in order to maintain capital ratios.
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Do you have facts to support that?? Any audited company (which all the banks are) would need to take the write-down every quarter when they release earnings. In these days of Sarbanes Oxley, no auditor would allow a company to release earnings that didn’t have an “attempt” to write them down to market.
IMO, the issue is that the write-downs have been taken but right now they are paper losses. By selling to the goverment, they become real losses.
If the opportunity to make money on these depressed assets is so great, then why don’t cash rich players with long investment horizons, like sovereign wealth funds, university endowment funds, and the Buffetts of the world, swoop down and buy these up? Is Federal Government better at assessing these assets than the professionals?
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Watch and see what happens next week. If the government establishes a bid, say at 30 cents on the dollar, there very well may be other players jumping in to buy at a higher price. It is not happening now because of the sheer panic in the market.
That statement was copied from the other poster. You would have to ask them. What they probably meant is that they were using “phony” market values, above actual.
Well, that's the $64,000 question, so to speak. ;-)
Markets fluctuate, and there's nothing unusual in an individual stock going up or down 50% in a single year, although there may be no news that justifies either extreme.
And certainly markets have been unreasonably bearish before.
So, yes, it is conceivable from history alone that the pros are in a bear panic, and the proverbial blood is in the streets. However, as far as I can tell, we haven't yet seen a Hetty Green who will serve as an oracle, and plunk down her money to "buy cheap and sell dear."
My own opinion, and it's not a particularly informed one but at least it's free, is that we have finally hit a bottom of some sort.
When will we bounce off of it? I have no idea, but generally the deepest panics have lasted a year or so; some even just a few weeks. Unfortunately, the effects of panics have sometimes lasted many years; I hope that we are going to be wise enough to steer through these straits without going a years-long event.
The Japanese did a very successful fight against economic collapse, but even they stayed in the doldrums of deflation for many years. They had the good fortune of having vast amounts of cash wealth, and I think that was a very important feature that many economists missed in the economic analyses that I have seen of the Japanese recovery from their bubble.
I think that an RTC 2.0 is indeed probably the most feasible route out, but only history will tell.
As to reforms, I have to think that the people who design derivatives have to be kicking themselves over the obvious failures in their work. Clearly we have simply seen too many and too big of failures of these instruments in both the debt and credit markets to consider their designs to be sound.
It's also clear that any laws or regulations compelling lenders to make economically unsound loans, such as loans to people who cannot be expected to repay those loans, must be rescinded. Economic sense must be re-established: banks must be allowed to charge appropriate risk premiums on loans that are risky.
“I am not sure you read my entire post. Did you read the part that said: “We can argue as to whether these limitations are appropriate or whether more are needed. Hopefully that is what our representatives are doing!”
Ultimately, you and I and anyone else on the entire planet can only be faith-based optimists or faith-based or record-based pessimists here. We have no way of knowing whether these limitations, or any limitations whatsoever may be appropriate, and it wouldn’t matter if we did. Or didn’t.
Hank Paulson has held the “world will blow up” shotgun to the head of Congress and is at massive advantage over them as he knows better than any of the Congessites the ramifications of what might happen should this funding be withheld or any of his rights under the new proposal-soon-to-be-act be withheld or modified. Indeed, the very act of discussing them, because of the resulting delay in enacting them, is now “casus explodi”. So evidently discussion is off the table.
And of course, they will comply. I only bring this up because if Paulson is so smart that he can see what might happen at this juncture, then that sort of ratifies the notion that he was probably smart enough to see what might happen when he was being warned by multiple parties about the ramifications over the past year and did nothing other than try to jawbone the problems away. Or lie about their potential severity. Whichever choice you feel is more accurate.
“As for your comments regarding Paulson, what are you recommending?? Shall we go ahead and fire him too??”
No. Let’s make him our absolute monarch by approving this act. Let him have complete control over every FIRE financial transaction and the value of every asset.
And by the way, whom else got fired?
“Get rid of Paulson, for he is NUTS!”
Not nuts. Just helping out his pals at Goldman.
And by the way, whom else got fired?
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Perhaps an inappropriate use of the word “too.” I wasn’t saying anyone else got fired. I was saying that on top of all the other problems going on, should we go ahead and fire the one guy that most market participants have at least some trust in.
BTW, I just saw the article by Newt “Before D.C. Get’s Our Money, It Owes Us Some Answers, on another thread.
http://www.freerepublic.com/focus/f-news/2087228/posts
To me this is the sensible discussion that we should be having.
The reason the Secretary of the Treasury wants authority to purchase securities without the review of any agency or court of law is because many of these securities are practically worthless. Financial institutions have either acquired or originated various structured finance products for which there is no underlying collateral.
“The reason the Secretary of the Treasury wants authority to purchase securities without the review of any agency or court of law is because many of these securities are practically worthless. Financial institutions have either acquired or originated various structured finance products for which there is no underlying collateral.”
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Wow!! I sure would like to see a reference link that shows the FACTS to support your position.
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